What Is the Monthly Payment on a $100,000 Home Equity Line of Credit?

A Home Equity Line of Credit or HELOC is a flexible borrowing option that enables homeowners to access funds based on the equity in their houses. Unlike a traditional mortgage loan, a HELOC has a revolving credit line, meaning borrowers can withdraw money as needed during the draw period and repay the balance later during the repayment phase. A common question for HELOC borrowers is: “What will my monthly payment be?” The answer depends on the interest rate, the amount borrowed, and whether you are in the HELOC draw period or the repayment period. Let’s explore these variables and provide examples at 7%, 8%, and 9% interest rates to understand what monthly payments might look like for a $100,000 HELOC.

Understanding HELOC Monthly Payments

A HELOC typically has two phases:

1. The HELOC Draw Period:
   During this phase, which lasts 5 to 10 years, borrowers can access their credit line as needed. Payments are often interest-only, meaning you pay only the interest on the borrowed amount. This makes payments lower during this period but does not reduce the principal balance. Learn more about interest-only HELOCs.
2. The HELOC Repayment Period:
   After the draw period ends, the repayment phase begins, typically lasting 10 to 20 years. During this time, borrowers must repay both the principal and interest, which increases the monthly payment significantly.

Monthly $100,000 HELOC Payment Scenarios

To illustrate the potential monthly payments for a $100,000 HELOC, let’s consider both the draw and repayment periods at interest rates of 7%, 8%, and 9%.

1. Interest-Only Payments During the Draw Period

During the draw period, you pay only the interest on the amount you borrow. The formula to calculate monthly interest is:

$$\text{Monthly Interest Payment}=\text{Loan Balance}\times \text{Annual Interest Rate}÷12$$

$100,000 HELOC at 7% Interest Rate

If you borrow the full $100,000:

$$100,000\times 7\%÷12=583.33$$Your monthly payment would be $583.33.

$100,000 HELOC at 8% Interest Rate

$$100,000\times 8\%÷12=666.67$$Your monthly payment would be $666.67.

$100,000 HELOC at 9% Interest Rate

$$100,000\times 9\%÷12=750.00$$Your monthly payment would be $750.00.

These payments remain constant as long as you only pay interest and do not borrow more during the draw period. However, they can vary if the interest rate is variable or if you borrow additional amounts.

2. Principal and Interest Payments During the Repayment Period

In the repayment phase, the borrower repays both the principal and interest, typically in equal monthly installments over the repayment term. Assuming a 10-year repayment period and fixed interest rates, we calculate the monthly payment using an amortization formula or loan calculator.

At 7% HELOC Interest Rate (10-Year Term)

The monthly payment for $100,000 over 10 years at 7% interest is approximately $1,161.08.

At 8% HELOC Interest Rate (10-Year Term)

The monthly payment for $100,000 over 10 years at 8% interest is approximately $1,213.28.

At 9% HELOC Interest Rate (10-Year Term)

The monthly payment for $100,000 over 10 years at 9% interest is approximately $1,266.76.

These payments are significantly higher than the interest-only payments during the draw period because they include both principal and interest.

Comparing $100,000 HELOC Payment Scenarios

Let’s compare the total monthly payments for the draw and repayment phases across the three interest rates:

Interest Rate	Interest-Only Payment	Principal + Interest Payment (10-Year Term)
7%	$583.33	$1,161.08
8%	$666.67	$1,213.28
9%	$750.00	$1,266.76

As shown, interest-only payments during the draw period are much lower than the payments required during the repayment phase.

Factors That Affect Your Monthly HELOC Payment

1. Interest Rate Type:
   Most HELOCs have variable interest rates tied to the prime rate, which can fluctuate. Higher rates increase your monthly payments.
2. Borrowed Amount:
   You only pay interest on the amount you withdraw, so borrowing less than the full $100,000 will result in lower payments.
3. Repayment Term:
   A shorter repayment period increases monthly payments but reduces the total interest paid. Longer terms lower the monthly payment but increase overall costs.
4. Additional Borrowing:
   If you withdraw more money during the draw period, your monthly payment will rise accordingly.
5. Lender Policies:
   Some lenders may offer interest-only repayment terms for a portion of the repayment period or require balloon payments at the end.

Is a $100,000 HELOC Loan Right for You?

Understanding the potential monthly payments on a HELOC is crucial to determining if it’s the right financial product for your needs. HELOCs offer flexibility during the draw period, but borrowers should plan for the higher payments that come with the repayment phase. Additionally, variable interest rates can introduce uncertainty, making it important to budget carefully.

The monthly payment on a $100,000 HELOC varies based on the interest rate, the phase of the loan, and the terms of the agreement. During the draw period, payments are typically interest-only, with amounts ranging from $583.33 at 7% interest to $750.00 at 9%. In the repayment phase, monthly payments increase significantly to include both principal and interest, ranging from $1,161.08 to $1,266.76 for a 10-year term.

When considering a HELOC, evaluate your financial situation, the anticipated use of funds, and your ability to manage higher payments during the repayment phase. By understanding how HELOC payments work and planning accordingly, you can make the most of this flexible financing option while minimizing financial stress.

FAQ

Can You Do a Balance Transfer on a HELOC?